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Palm stays atop handheld market

The company is one of the chief beneficiaries of the sales surge in handheld computers, but competitors using Microsoft's Pocket PC OS continue to chip away at the gap.

Handheld manufacturers had a far better holiday season than expected, although sales were still slightly down from 2000.

Worldwide shipments of handheld computers increased 68 percent over the third quarter to 3.83 million units, according to figures released Thursday from IDC. Compared with the same period a year ago, shipments declined 4.2 percent, but that's far less of a decline than other technology sectors experienced.

Palm, the market leader worldwide and in the United States, was one of the chief beneficiaries of the sales surge. Palm OS licensees also saw growth. Combined, the Palm companies occupied more than half of the market and the top two spots. Nonetheless, competitors using Microsoft's Pocket PC OS continued to chip away at the gap.

Palm's market share rebounded in the fourth quarter to 42.6 percent, or 1.63 million units shipped. An inventory glut brought on by slower-than-expected sales hurt Palm and caused a drop in its market share in the second and third calendar quarters. Palm's worldwide market share dropped to 35 percent in the second quarter and 33 percent in the third.

Still, the year before, Palm held a 53 percent share in the fourth quarter. Meanwhile, Pocket PC manufacturers experienced growth. Compaq Computer's shipments grew 125 percent in the fourth quarter, compared with the same quarter last year and 99 percent compared with the third quarter. Compaq held the No. 3 spot with 9.6 percent of the worldwide market. Hewlett-Packard, the No. 5 manufacturer, also experienced high double-digit growth.

"Over the course of last year, Pocket PC makers were able to make a significant dent in Palm's handheld share because of operating hiccups at Palm," IDC analyst Weili Su said. "However, Palm was able to maintain its lead and rebound in the fourth quarter because of the unexpected popularity of its mid- to low-end devices."

In its most recent financial update, Palm said that shipments of its m100, m105 and Palm Vx devices were higher than expected and also caused the average selling price to drop to $164, down from $227 in the previous quarter and $212 in the same quarter a year ago.

Handspring, which licenses the Palm OS, held the No. 2 position worldwide with 11.1 percent of the market in the fourth quarter. Meanwhile, HP's shipments grew 78 percent compared with the same quarter a year ago and 46 percent vs. the third quarter. HP had 6.2 percent of the worldwide market, which was enough for fifth in market share.

Among the Palm OS licensees, Handspring's shipments grew the most, up 36 percent over the same quarter last year.

In the United States, Palm held the top market share spot followed by Handspring, Compaq, HP and Sony, another Palm licensee.

Chinese maker Hi-Tech Wealth overcame Minren as the No. 1 Chinese manufacturer of handhelds and No. 4 worldwide. Hi-Tech Wealth and Minren both license the Pocket PC operating system and only sell handhelds in China.